Monday, September 27, 2010

Driving down the costs of offshore wind

Offshore wind projects are expensive to build and thus the price of electricity to consumers is higher than electricity generated by onshore wind farms and fossil fuel plants such as coal and natural gas. That's the bad news. The good news is that with government support for research and development, offshore wind costs can be driven down considerably. (GW)

The UK's efforts to hit its renewable energy target are likely to be boosted by a near-25% fall in the cost of offshore wind turbines by 2025, engineers claimed today. But they warned that the prices may not fall – or could even rise – if the government cuts its financing of research and development, or if competition between wind turbine makers or improvements in technology do not materialise.

Like the opening of the Thanet offshore farm, where British firms reaped just 20% of the £900m invested in the project, UKERC's report highlights the UK's reliance on foreign technology. Around 80% of offshore wind components are imported, it says, meaning the UK is failing to grow jobs and cut costs by reducing exposure to fluctuating exchange rates.

Gross also said that while it is feasible in engineering terms for around 3,000 offshore turbines to be built by 2020, it will be "a big ask" on a financial level. Earlier today, Susan Rice, managing director of the Lloyds banking group in Scotland, warned that many companies are still wary about the risks and upfront costs of building multibillion-pound offshore windfarms.

Like other sources of energy, offshore wind's costs rose considerably in the past decade despite expectations it would fall, the report notes. Capital costs for projects coming online in 2008 were double those of 2003 levels. "Rising commodity prices [steel is a key component for turbines], supply chain shortages and currency movements created a perfect storm," said Gross.

However, Gross said the better outlook today meant his report's worst-case scenario – which sees the mid-2020s price of wind power rise to £185/MWh – was "very unlikely."